The Dow gets hit with a sledgehammer — how worried should you be?

This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

On big down days for the stock market or prolonged stretches of sell-offs, it’s good to have a trusted playbook.

Think of it as a guide to keeping your sanity amidst the chaos and, hopefully, your portfolio flush with long-term gains.

For me, the sell-off playbook is a twofold exercise honed over years of reporting on business news.

First, chat up the smartest people I know in markets and business. What are they doing and saying, and why? Do they sound or look fearful?

And two, think deeply on whether something truly has changed in the market or if investors are in a tizzy over splashy headlines.

Suffice it to say, I had to dust off this sell-off playbook this week. The end assessment: Relax, folks, this isn’t the start of a bear market even though the tape feels punishing.

Why, you ask?

A lot of the smartest people in the room, so to speak, have valid reasons to stay long on stocks AND the economy isn’t falling off a cliff AND we are likely to still get rate cuts in 2025 AND we have a pro-business president in Trump taking office in less than a month.

“Big picture, with record earnings, record profit margins, strong productivity, and overall improving consumer and small business sentiment, it is hard to think that this bull market is over,” Carson Group chief market strategist Ryan Detrick told me.

Says Truist co-chief investment officer Keith Lerner, “The bull market is still intact, but we are seeing a short-term gut check.”

A gut check, indeed.

The Dow Jones Industrial Average promptly finished Wednesday’s session down more than 1,100 points. It rallied slightly on Thursday, but the selling pressure renewed on Friday.

The index of 30 well-known stocks such as Salesforce (CRM) and Disney (DIS) is off by almost 4% in December as losing stretches have begun to pile on one another amid renewed uncertainty on rate cuts.

The S&P 500 is down 3% this month. Market leader Nvidia (NVDA) is down 6% in December.

What has spooked the markets is the Fed not committing to aggressive rate cutting in 2025.

The consensus among Fed officials is now for two rate cuts next year, down from four previously forecast in September, as the monetary policy body remains concerned about the inflationary outlook. The outlook for inflation is further clouded by potential moves by the incoming Trump administration, such as possibly inflationary tariffs on China.



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